By Susan Kraemer

Because of the longer build time for Concentrated Solar Power (CSP), the first of the Recovery Act-supported projects are just starting to come online now, 2-3 years after getting their loan guarantees. Soon, these projects will be able to provide US investors with a track record for CSP in production, but not yet.

CSP is still a very nascent technology in the US. The first utility-scale CSP projects built in the US - since the original SEGS parabolic trough plant in California - don’t yet have even two consecutive plants using the same technology.

Now two months in operation, Ivanpah is a tower project, but without storage, and Solana, a few months older, has storage but is a parabolic trough project. Crescent Dunes, a tower project with storage, is just entering commissioning.

These three represent the first half of a salvo fired by the Recovery Act’s support for CSP with the help of the ITC and Loan Guarantees. But the second round has stalled.

While Loan Guarantees and the ITC helped get these initial US projects going, the next round has slammed up against the expiration of the 30% ITC less than two years from now, cutting off the surge in CSP at half-way point.

With the same back-end thermal power block as a conventional thermal plant, CSP takes as long to build as those fired by steam from burning fossil energy.

Long construction cycle

“CSP has a longer construction cycle than PV, so you’re starting to bump up against deadlines,” says SolarReserve chief financial officer Tim Rosenzweig. “You must be in service by December 31st, 2016.”

Currently, investment tax credits are worth 30% of the project value, but they drop to 10% in January 2017.

“A lot of value evaporates overnight,” he explains. “The way it works is you must be completely finished by December 31st. I’ve been in the wind business for 10 years and there’s a lot of crazy things that have to happen to get that to work by December 31st. A lot of Christmases ruined.”

For SolarReserve, signing utility PPAs and navigating California’s famously rigorous permitting for their Rice project has been accomplished smoothly. The only remaining issue is financing.

“The difficulty is that these projects take two, to two-and-a-half years to construct and we’re running into the expiration of the 30% ITC at the end of 2016; so we’re backed right up to the expiration,” says SolarReserve CEO Kevin Smith.

Investors still need the extra boost that the ITC provides. ”We are really right on the ragged edge. We really need to start construction by the middle of the year.”

ITC no incentive at 10%

“For all intents and purposes the ITC is expiring in 2016,” says Peter Lawtence, Director of Public Policy and Government Affairs at Novogradac & Co.

“When the Office of Management and Budget (OMB) scored President Obama’s FY-2015 budget request, it found that repealing the permanent 10% ITC beginning in 2017 would have a ‘negligible revenue effect.’ That indicates it’s not desirable enough for anybody to buy in. So people consider the expiration of the 30% ITC as if the whole thing was expiring.”

“There has been movement in congress to extend it,” says Smith. “There was a bill introduced by Senator Heller from Nevada and Senator Bennet from Colorado to - not extend the deadline - but to change it to ‘commence construction by’ then.”

Their bill S2003 was taken up by the Senate Finance Committee this month in the Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act.

An identical bill, introduced by House Democrats got 102 co-sponsors; HR 2502, the Renewable Energy Parity Act of 2013.

And HR 3017 the Renewable Energy Construction and Investment Parity Act of 2013; proposed by a California Republican, Representative Cook, who represents the Mojave Desert, got several cosponsors among Arizona Republicans.

The three are in regions with CSP, and represent the beginnings of the sort of bipartisan support that has successfully lofted the wind industry to success in the US.

Building on these bills, various amendments to the EXPIRE Act changed language from ‘commence commercial operation by’ to ‘start construction by’ for solar. But none extended the ITC.

“It was certainly talked about, but the challenge was that the 30% ITC had not expired,” explains Lawrence, who sat in at the Finance Committee meeting. “So it didn't fit the ground rules for consideration.”

The EXPIRE Act covered only a raft of tax incentives that have expired or will by 2015.

A permanent PTC?

In a surprise move, President Obama’s FY-2015 budget proposed making the wind Production Tax Credit (PTC) available for solar, and making it refundable - and permanent. The PTC subsidizes energy generation by the kilowatt-hour.

Any permanent tax credit would be a step towards putting at least one tax incentive for renewables on a level-playing field with fossil energy.

“There are dozens and dozens of tax credits for conventional energy,” says Smith, who prior to joining SolarReserve as CEO spent many years building traditional power plants. “They never expire - they’re built into the tax code.”

“For example, if the Keystone pipeline goes ahead; the refineries who refine that type of alternative fuel get a 50% ITC.”

In introducing the EXPIRE Act, Finance Committee Chair Senator Wyden urged committee members to deal first with the immediate expirations “and then put a lens to each of these provisions before deciding which ones deserve a permanent spot in a 21st-century tax code.”

Start with an expired solar tax credit

Even though no 30% ITC extension made it into the bill reported out of the Finance Committee, one changing language from ‘commence commercial operation’ to ‘start construction by’ did.

Building on President Obama’s idea of a solar PTC, Senator Cantwell’s amendment #3 introduced ‘start by’ language - by first adding it to a solar PTC that had expired in 2006; thus falling within the scope of the EXPIRE Act.

This had allowed a solar project to claim a tax credit during its first 10 years of operation. In 2013 it was 2.3 cents per kilowatt-hour generated.

Amendments to the EXPIRE Act: Cantwell #3

“Modify the extension of the beginning-of-construction date for Sec. 45 Production Tax Credit or Investment Credit in lieu of the production credit to include solar projects:

“…in the case of a facility using solar energy, is placed in service before January 1, 2006 or the construction of which occurs between January 1, 2014 and December 31, 2015.”

“As we move to allow facilities qualifying for the production tax credit to elect to take the investment tax credit in lieu of the production tax credit for facilities that begin construction by the end of 2015, it is important to extend eligible property to solar facilities,” her amendment notes read.

“Under current law, solar facilities placed in service before January 1, 2006 qualify for the credit. This amendment would simply adjust the date to fit within the context of the EXPIRE Act and ensure that it is germane to the bill under discussion.”

The fact that there were many amendments dealing with the solar ITC itself signals that there is real concern with the issue - and there’s plenty of time until December.

“Some of the amendments are withdrawn by members themselves to be produced in a larger bill at a later date,” Finance Committee staffer Sam Conchuratt points out.

The end of the year, when omnibus tax bills are passed into law very quickly, could see an interesting surprise.

To comment on this article, please write to the author, Susan Kraemer.